By Law, foreign ownership of property in Indonesia is prohibited however, there are ways for foreigners to obtain ownership status via leasehold or partnership arrangement.

The three basic option for foreign ownership are:

1. Via an Indonesian nominee - The Indonesian nominee is registered on the land title deed. The nominee is also required to complete three other legal agreements a) a loan agreement to prove the funds have been given to the nominee by the foreign individual, b) an irrevocable power of attorney which enables the foreigner to sell, mortgage, lease or otherwise use the land and c) a permanent right of use which gives the foreigner the right to occupy and use the property.

The Nominee will sign four documents with the foreigner as follows:

A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.

A Right of Use agreement: allows the foreigner to use the land.

A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.

Power of Attorney: The nominee signs an irrevocable Power of Attorney giving the foreigner complete authority to sells, mortgage, lease or otherwise deal in the land.

2. Via a Penanaman Modal Asing (PMA - Foreign Investment Company) - A PMA company can be 100% foreign owned and this form of title is valid for 30 years with possible extensions of 20 years and 30 years. This option can be used by multinational corporations as well as smaller off-shore companies, with hotels commonly using this form of ownership.

3.Leasehold title granted to a foreign individual - a foreign individual can obtain a 25 year lease agreement renewable for a further 25 years. The government is considering extending this lease period from 25 - 70 years. The lease is direct between the foreigner and the local owner. Retirees relocating to Bali or foreign companies requiring residence for their employees commonly use this method. A leasehold investment offers protection to the foreigner during the term of the lease.

Ownership in Indonesia

Laws related to the ownership of landed property in Bali are governed by the National Land Agency. The agency administers matters such as registration of land rights, the granting of rights and various permits for use of land. Under the classification of certified land, there are five principle types of land rights:

Right of Ownership (Hak Milik) - This refers to absolute ownership of land and is only valid for an Indonesian citizen, not a local or foreign corporate entity.

Right to Build (Hak Guna Bangunan - HGB) - This refers to the right to construct a building on land for a period of 20 or 30 years (renewable for another 20 years). This right can be held by any corporate entity (local company or a government approved PMA company).

Right to Rent (Hak Sewa Bangunan) - This is the right to use land owned by another party (the lessor) for building purposes. Terms of this right depend on agreements between the parties. This right is available for a foreigner who is permanently based in Indonesia or a foreign legal entity that has a representative office in Indonesia.

Right of Use (Hak Pakai) - This refers to the right to use land for a certain period. This right may be held by certain foreign individuals or a foreign legal entity with a representative office in Indonesia.

Right of Exploitation (Hak Guna Usaha) - This right allows the exploitation of State-owned land for agriculture, fishery or husbandry purposes for a period of up to 35 years (25 years extension possible). This is valid for Indonesian individuals/entities along with government approved PMA companies.